Overall, the July numbers reflect an ongoing shift in the market, as rising prices led more homeowners to put their homes up for sale and eased severe supply shortages that fueled bidding wars this year.

As real mortgage rates rise, real estate agents and economists say they expect a better balance between supply and demand in the months ahead.

Competition among buyers has cooled, but not completely, said John Evans, broker and owner of The Evans Group in Coto de Caza. "The market seems to be transitioning into more stability, with continued upward momentum," Evans said.

The median home price – the midpoint of all sales – was $539,500, a six-year high for July. It shot up from $450,000 in July 2012, but dipped from $545,000 in June. In the long term, however, such a slight change isn't unusual.

Home sales were up at 4,402 deals in July, from 3,087 homes in July 2012, according to DataQuick's latest report.

Orange County had the smallest yearly percentage gain of a six-county Southern California region, where the overall median home price hit $385,000. That's a 25.8 percent increase over last July and an eight-year high for that month. Los Angeles had a 28.8 percent annual jump, to $425,000.

"July home sales came in very strong, and we think a lot of the increase in activity can be chalked up to a rising inventory of homes for sale," said John Walsh, DataQuick president. "The jump in mortgage rates a couple of months back might have spurred more buying, too.

"The market continues its rebalancing act, with more and more people who've been 'underwater' now able to sell their homes at a profit, or at least break even."

Walsh predicted that home prices will continue to rise, but not as steeply as earlier this year.

In both Orange County and Southern California, higher-priced markets showed the strongest sales gains.

The number of Southern California homes that sold from $300,000 through $800,000 increased 51.7 percent year-over-year. At the same time, homes selling for $500,000 or more jumped 73.5 percent from last July, and sales in the $800,000-plus range soared 77.5 percent, DataQuick showed.

In Orange County, the difference was even more striking.

The sale of homes under $400,000 went down 6.2 percent. But homes that sold for $400,001-$500,000 were up 50.2 percent; $500,001-$600,000 homes were up 53.8 percent; $600,001-$700,000 homes were up 88.1 percent and homes that sold for more than $700,000 were up a whopping 123.7 percent.

"The low-end is typically the most constrained in terms of supply because so many people are underwater and therefore can't sell, and because foreclosure activity is down so much," he said. Foreclosure notices filed by lenders dropped by 53 percent in July year over year, while default notices fell by 62.9 percent, the report showed.

"Also, price appreciation means that some of the same homes that would have sold for less than $200,000 or $300,000 a year ago would now sell for more than that," LePage said.

DataQuick estimates that short sales made up 11.2 percent of home sales in Orange County in July, compared to 26 percent in July 2012.

Earlier this year, prices soared as a limited supply of homes for sale pushed buyers into bidding wars. The highest annual jump was in April, at 27.4 percent. July's increase was the lowest, percentagewise, since February's 22.3 percent.

Adam Brett, a real estate agent with Prudential California Realty in Fullerton, said he saw the market shift when the 30-year mortgage interest rate suddenly spiked to 4.46 percent in June, the largest weekly increase in more than 26 years, according to mortgage giant Freddie Mac.

"That was the impetus that caused this market to completely switch," Brett said. "Demand receded and a lot of sellers decided to say, 'It looks like the market is basically peaking, I want to sell."

Brett said there's been a 50 percent increase in homes on the market in north Orange County over the past two months. "The number of sales will remain steady," he said. "However, the upward pressure is gone. Demand outpacing supply is over."

Inventory has gone up "tremendously,'' said Brian Doubleday, broker and co-owner of IML Real Estate in Ladera Ranch. He counted 161 homes on the market in Ladera Ranch this week, compared to a low point of less than two dozen earlier this year.

"Buyers have a little more time to look at property," Doubleday said. "If a property is perfect, a great location in great condition, those still go," likely within about three days. But he added, "If it's not (perfect) and falls into that group of the other properties, they have to be priced a little more aggressively or they're going to sit for a little longer. It's not uncommon to find properties on the market that sit for 60 to 90 days."

Absentee buyers, mostly investors as well as second-home buyers, represented 22.5 percent of July home sales in Orange County, up from 21.6 percent in July 2012. Cash buyer fell by .1percent, to 29.2 percent, according to the DataQuick report.

Homes that flipped – or resold within six months -- made up 4.5 percent of sales in July, up from 3.1 percent for the same month a year ago and 3.9 percent in June.

Pending deals typically take 30 to 45 days to close, so DataQuick's latest report reflects contracts signed in May and June.

The latest analysis from Steve Thomas of ReportsOnHousing.com shows that in the two-week period prior to Aug. 4, the active listing inventory in Orange County grew by 182 homes, a 3 percent bump, totaling 5,522 homes. That's up from 3,183 homes on the market in March, an increase of 73 percent.

Thomas said this summer marked the first time in just over two years in which the housing supply was higher than the prior year.

"We can expect this trend to continue," he said. "In a normal cycle, the inventory stops growing by the end of August. That will most likely occur this year as well, and the inventory will reach around 6,000 homes."

The expected market time for all homes in Orange County is now at two months, he said, levels not seen since March 2012, he said. The expected market time had dropped to 1.11 months in March. A normal market is about six months.

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